What a few weeks! The market has been selling off like we are in recession with the market down 3-4 % in a day (way above the normal 2% selloff).
Volume is 200% up on the average volume and there is no doubt that investors and traders have experienced some painful days. This also goes for Stock-Market-Strategy as well but we are not worried or emotional and there are several reasons for this.
But first and foremost we cannot allow ourselves to be emotional in these market conditions. The question you have to ask yourself is: when does being emotional help you in business and investing? When putting your hard earned money to work in the market you have to accept what the outcome might be even before it happens. Only invest or trade what you can afford to lose.
Of course when it comes to investing the risk is what your stop is and not what you invest in Dollar terms. Yes, a company can go bankrupt but the charts will normally give warning signs well ahead and thereby you will be out well in advance. The bottom line is whether you are profitable or not, you have to control your emotions.
In normal market selloffs we look to enter strong stocks in strong sectors as we believe we see value and low risk entries. In this current market we did the same and despite the big selloff our stocks are holding up fairly well. Now, due to the size of this selloff, we will keep a close eye on the market and the stocks when we bounce. We will measure the strength to determine whether this will be a bounce in a bear market or a rally in a bull market.
As our stocks are relatively strong, this means that even if the market only manages to bounce a little bit, our stocks will more often than not give a small profit or at least break even. This is more than all the top hedge funds can say as they are caught with big positions they cannot unwind as fast as the smaller investors!
When looking at the bigger picture we are still massively outperforming the market because our strong stocks have been outperforming for a longer period of time and not only during this selloff. We recommend to all members, free or paid, to look at bigger picture.
So let us look at the market since 2009 where we entered a new bull market. There has been plenty of profit opportunities in this 2 year bull market so this recent selloff will only be a small blow to your account. (see chart below)
[caption id="attachment_1563" align="aligncenter" width="460"] Click to view[/caption]
This is of course only if you have used smart money management and not reinvested all your money including profit. If you keep adding the profit to your investment you will take a bigger hit in dollar terms when market does turn over. For new investors who have not made a big pile of money prior to this selloff do not worry. There will always be opportunities to make money. Patience is important. Do not rush into anything. Do your due diligence!
By looking at this chart you can see that despite the reason selloff that almost brought SPY/SP-500 down to summer 2010 low our well known stocks such as AAPL and SLW is still well above their summer 2010 low. By choosing strong stocks in strong sectors you will be more immune for the selloffs like the one we are experiencing now. It also helps on the emotions that you can see that you are still doing well in the bull market that we started buying in 2009.
So first reason we are not emotional is because despite the recent selloff we are still sitting on profit in this bull market.
Another reason that we are not emotional is that all our indicators and market analysis did not really give sell signal prior to the selloff. Of course now the indicators and analysis is showing warning signs. This lack of warning before the selloff indicates that we should but not necessarily get a rally or bounce big enough to get out with small profit or break even on the last trades we did. This is not to say that our older trades are still way in the profit.
Bottom line: Stay professional and not emotional and follow your game plan. This has proven to be a winning strategy for us especially during 2008 bear market.
Click to view[/caption]
This is of course only if you have used smart money management and not reinvested all your money including profit. If you keep adding the profit to your investment you will take a bigger hit in dollar terms when market does turn over. For new investors who have not made a big pile of money prior to this selloff do not worry. There will always be opportunities to make money. Patience is important. Do not rush into anything. Do your due diligence!
By looking at this chart you can see that despite the reason selloff that almost brought SPY/SP-500 down to summer 2010 low our well known stocks such as AAPL and SLW is still well above their summer 2010 low. By choosing strong stocks in strong sectors you will be more immune for the selloffs like the one we are experiencing now. It also helps on the emotions that you can see that you are still doing well in the bull market that we started buying in 2009.
So first reason we are not emotional is because despite the recent selloff we are still sitting on profit in this bull market.
Another reason that we are not emotional is that all our indicators and market analysis did not really give sell signal prior to the selloff. Of course now the indicators and analysis is showing warning signs. This lack of warning before the selloff indicates that we should but not necessarily get a rally or bounce big enough to get out with small profit or break even on the last trades we did. This is not to say that our older trades are still way in the profit.
Bottom line: Stay professional and not emotional and follow your game plan. This has proven to be a winning strategy for us especially during 2008 bear market.